11 U.S.C. § 362(c)(3)(A) – Circuit Split on Whether the Automatic Stay Ends as to Property of the Estate for Repeat Bankruptcy Debtors

Termination of the Stay for Serial Filers “With Respect to the Debtor” Under 11 U.S.C. § 362(c)(3)(A) Creates Circuit Split

An exception exists under 11 U.S.C. § 362(c)(3)(A) to the automatic stay normally imposed in bankruptcy if another bankruptcy of “the debtor was pending within the preceding 1-year period but was dismissed,…the stay under subsection (a) with respect to any action taken with respect to a debt or property securing such debt or with respect to any lease shall terminate with respect to the debtor on the 30th day after the filing of the later case.”

This phrase — “with respect to the debtor” — under Section 362(c)(3)(A) of the Bankruptcy Code has caused a split between courts in the Ninth Circuit and other circuits as to the scope of the termination of the automatic stay for a repeat bankruptcy filer.

Ninth Circuit BAP: “section 362(c)(3)(A) terminates the automatic stay in its entirety on the 30th day after the petition date.” In re Reswick, 446 B.R. 362, 373 (B.A.P. 9th Cir. 2011)

In the Ninth Circuit, the Ninth Circuit Bankruptcy Appellate Panel (BAP) found that “section 362(c)(3)(A) terminates the automatic stay in its entirety on the 30th day after the petition date.” In re Reswick, 446 B.R. 362, 373 (B.A.P. 9th Cir. 2011).

Split Within the Ninth Circuit – “The plain text of § 362(c)(3)(A) is crystal clear that the automatic stay is terminated with respect to the Debtor.” In re Rinard, 451 B.R. 12, 18 (Bankr. C.D. Cal. 2011).

However, not all courts in the Ninth Circuit have followed the non-binding opinion in Reswick, For example, the Hon. Scott C. Clarkson of the Bankruptcy Court for the Central District of California later that same year found that: “The BAP [in Reswick] designates the text of the provision as ambiguous only because it believes that the phrase ‘with respect to the debtor’ is not placed there by Congress to differentiate between property of the debtor and property of the estate, but instead to give certain meaning (the meaning assigned by the Reswick BAP) to the remaining provisions of § 362(c)(3). ” In re Rinard, 451 B.R. 12, 18 (Bankr. C.D. Cal. 2011). Rinard continues that: “The plain text of § 362(c)(3)(A) is crystal clear that the automatic stay is terminated with respect to the Debtor. There is no mention of the Estate in the text. There are no fuzzy words; there are no hanging paragraphs; there are no words requiring a dictionary.” In re Rinard, 451 B.R. 12, 19–20 (Bankr. C.D. Cal. 2011).

First Circuit: “§ 362(c)(3)(A) terminates the entire automatic stay — as to actions against the debtor, the debtor’s property, and property of the bankruptcy estate — after thirty days for second-time filers.” In re Smith, 910 F.3d 576, 591 (1st Cir. 2018)

In 2018, the First Circuit cited Reswick to find that: “Based on the provision’s text, the statutory context, and Congress’s intent in enacting BAPCPA, we hold that § 362(c)(3)(A) terminates the entire automatic stay — as to actions against the debtor, the debtor’s property, and property of the bankruptcy estate — after thirty days for second-time filers.” In re Smith, 910 F.3d 576, 591 (1st Cir. 2018).

Fifth Circuit: “§ 362(c)(3)(A) terminates the stay only with respect to the debtor.” Rose v. Select Portfolio Servicing, Inc., 945 F.3d 226, 230 (5th Cir. 2019).

Then, in late 2019, the Fifth Circuit created a circuit split by citing Reswick and Smith to conclude that: “after reviewing the plain language of the provision and the context of the provision within § 362, we conclude that § 362(c)(3)(A) terminates the stay only with respect to the debtor; it does not terminate the stay with respect to the property of the bankruptcy estate.We believe the language in § 362(c)(3)(A).” Rose v. Select Portfolio Servicing, Inc., 945 F.3d 226, 230 (5th Cir. 2019).

Circuit Split is Ripe for Supreme Court Review

The bottom line is that very experienced jurists are certain that their view is “crystal clear” from the “plain language” of 11 U.S.C. § 362(c)(3)(A). With the Supreme Court inclined to review cases that have worked their way through lower courts before creating a circuit split, it is likely that this issue will make its way to the Supreme Court. With the Rose case from Fifth Circuit now filed with the Supreme Court, it may only be a matter of time.

If you have questions about bankruptcy law, contact the experienced counsel at Talkov Law to find a bankruptcy attorney in Riverside.